Portfolio Analysis: Igniting a long-term spirit in a short-term world (XXI). ADL Strategic Condition Matrix
Another Friday. Another door for a new weekend. Today´s purpose is, to begin with, the Arthur D. Little Strategic Condition Matrix. Next week I would like to introduce a critique of this tool in our next episode. So today, we will try to focus on the first step: Understanding the theory.
Cinema Paradiso. The last song that we shared was from Ennio Morricone, interpreted mainly by two of the most famous musicians coming from Generation X: Yo-Yoma and Chris Botti. Both musicians have been moving the waves. . As you can listen, their practice and devotion to the cello and the trumpet express their quality without hesitation. Yo-Yoma, an amazing cellist has won 18 Grammy Awards (1) and has been nominated 27 times. Chris Botti has only won 1 Grammy (2) until today, but he attracts youngsters to his jazz concerts, and that is great. Incroyable, isn´t it?
Just imagine all the Billboard and Grammy´s current new winners interpreted by physical symphonic real instruments? Just imagine the amazing quality of music using symphonic instruments as a background to the music awarded at the 2021 63rd Grammy Awards show? Performers as Bad Bunny, Black Pumas, Cardi B, BTS, Brandi Carlile, DaBaby, Doja Cat, Billie Eilish, Mickey Guyton, Haim, Brittany Howard, Miranda Lambert, Lil Baby, Dua Lipa, Chris Martin, John Mayer, Megan Thee Stallion, Maren Morris, Post Malone, Roddy Ricch, Harry Styles, Taylor Swift, and others. All these artists deserve truly true music played by real instruments, instead of artificial software-produced music.
Conscious teenagers that are searching for a taste of good quality music production go back in time to listen to the group bands of our Generation X and beyond, because most new performers (regardless of their music genre) have not invested their resources and time to practice and adopt a band acoustic style or at least to consider real instruments behind their voices. Their music is created digitally with software and machines. Most performers are simply singing using an artificial digital created background, and do not show up accompanied by musicians of high caliber, bands that play real instruments with unplugged arrangements. You will see what I am talking about at the end of this post. For the time being, let´s continue with today´s topic, please.
Igniting the yearning to create your own portfolio matrix. If you are a faithful observant of the later models, the exercise of understanding the ADL matrix will be a piece of cake, because the basics of portfolio modeling are quite the same for all the best-known traditional approaches to portfolio analysis, with ample variety of external and internal factors. Corporate strategic planning using these portfolio matrixes is a beautiful exercise for teams within your company. Regardless of hiring an external consulting house or if you decide to do it as a business owner, we recommend initiating a DBR (Design-Based Research team at your company) which will originate a pilot project (under the Research and Development initiatives). As Eleonora Escalante Strategy, we will be paid off immensely if you start with designing your own tailor-made matrix because of reading this saga. It will take time, maybe a year, because reliable industry information is not around the corner, and if you find it, probably the cleaning and mopping of it, will be high. Nevertheless, it will be worth it.
Good information is valued when business owners realize the importance to find it, tidying it, holding it, and updating it. Industry associations, or specific business sector organizations are responsible for this information to flow and keep for the benefit of the same specific business sector associates. Good databases about industry attractiveness factors, or business sector profitability factors are golden. Nowadays most of the information that we find on the ubiquitous Internet is polluted (not clear, wrongly calculated, based on other people’s numbers, sometimes coming from invention). For us, it is risky to use polluted data for our saga examples, given the dynamic and unpredictable conditions of the external indicators. Each company is on duty to invest in their own Design-Based Research process for business-economic-environmental-social intelligence.
Arthur D. Little strategic condition matrix.
Who is Arthur D. Little (ADL)? According to the ADL website (3), the company started as a problem-solver entity in 1886. “Mr. Arthur Dehon Little opened a chemical-analysis office in Boston. And guess what? It started as a research bureau: An office dedicated to chemical research which would bridge the gap between emerging science and the practical needs of society and industry of those times”. Arthur D. Little consulting house has been helping numerous industries (as pulp and paper, communications, oil and gas, technology, fiber optics, railways, fabrics, defense, postal services, etc.) and solutions for countries´ states or cities (Minas Gerais-Brazil, Puerto Rico, Saudi Arabia, Dubai, Stockholm, etc) since then. The ADL consulting company has coined more than a century of experience, but their originality and foundation birth was always from the core of “research and development”. It helped General Motors in its quest to organize its first R&D laboratory. I can´t mention all ADL mandates, but “research and development” was always the way ADL won its caring reputation, which nowadays is a bit abandoned because ADL has immersed itself into enkindling disruptive technologies that still need to be proved, before rolling them out. I truly consider that it is urgent for ADL to reposition itself as the integral R&D premier cru of consulting again (this is our personal own opinion). ADL location in Cambridge, Massachusetts linked this company with MIT and Harvard University for decades. From the mindset of academics at the service to strategic analysis, in the 1970s, the ADL consultants decided to design and build a new analytical product portfolio model, taking into consideration the product life cycle and a more methodical approach to competitive position (4).
ADL look and feel. What is the ADL matrix? This model of product portfolio analysis is structured with five rows and four columns (5×4) resulting from combining two composite variables: industry life-cycle stage and market competitive position. So, here we go again with a definition of an X-axis that is called “Stage of Industry maturity”; and a Y-Axis called “Competitive position”.
X-Axis Stage of Industry Maturity: This axis considers the life cycle stage of a product, and it describes that any SBU located in their own market, at a certain period, may be positioned in one of the following four stages: introduction, growth, maturity, and decline. Each specific stage within the SBU Product life cycle can be identified, assessed, quantified, and characterized by a system of weighted score indicators.
Y-Axis Competitive position: The SBU market competitive position is also calculated with a reference to competition, using qualitative and quantitative variables, which provide a weighted score that helps us to determine which of the quadrants on the vertical direction is the correspondent one to each SBU.
ADL has categorized a list of factors that must be taken into account in order to assess the competitive position held by each SBU operating in a given market. Look at the table below (5)
| Type of factors to consider For calculating the Y-Axis measure | Competitive Position Factors (5) |
| Supply Factors | Long term contracts Labor costs Payment terms |
| Production Factors | Production flexibility and capacity Experience Technical skills Environmental protection Quality of management Skill or expertise Labor productivity Production costs |
| Commercialization Factors | Power and quality of distribution network Credit conditions Image of the product Product range Market Share Sales ForcePrice |
| Financial Factors | Profitability Financial stability Cash flow Technological Protection |
Based on these factors and using the same method of weighting, rating, scoring, and calculating it as we have shown you, the competitive position can be noted in 5 competitive positions, according to each SBU in relation to competitors on a given market. These positions are: (A) Dominant; (B) Strong; (C) Favorable; (D) Tenable; (E) Poor. We will describe them in detail in our next publication. We will also provide a critique of this framework.
For the time being, we will show you how the ADL matrix looks and feels below:
The song for today is from the group Foreigner. I am inserting two videos: The one I listened to when I was a teen (1987), and the symphonic arrangement 34 years later. Which do you like the most?
“Say You Will” from the album ‘Inside Information’ (1987). “Say You Will” reached No. 1 on Billboard Mainstream Rock Songs.
Blessings and see you again next week. Thank you for reading to me.
Sources of reference utilized today to prepare the slides above:
- https://www.grammy.com/grammys/artists/yo-yo-ma/11918
- https://www.grammy.com/grammys/artists/chris-botti/2908
- https://www.adlittle.com/en/about-us/history-0
- Tudor, Ionescu Florin; Valeriu, Curmel “Product Portfolio Analysis-Arthur D. Little Matrix”. Bucharest Academy of Economic Studies, Marketing Faculty. https://www.researchgate.net/publication/227462822_PRODUCT_PORTFOLIO_ANALYSIS_-_ARTHUR_D_LITTLE_MATRIX
- https://www.routledge.com/Strategic-Marketing-Planning/Gilligan-Wilson/p/book/9781856176170
Disclaimer: Illustrations in Watercolor are painted by Eleonora Escalante. Other types of illustrations or videos (which are not mine) are used for educational purposes ONLY. Nevertheless, the majority of the pictures, images, or videos shown on this blog are not mine. I do not own any of the lovely photos or images posted unless otherwise stated
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